Panic selling stock assets on the first working day of the week yet replaced growth. Regulator China has implemented a series of measures aimed at stabilizing the situation in the stock market: lower rates, reserve requirements, liquidity injections carried out. As a result, the indices began to win back drop on Monday. At the end of the week NASDAQ added 3.07% to close Friday. Dow Jones up 1.07%. Hong Kong HSI ended the week with a total of -3.09%, and after failing to fully recover losses incurred earlier. The German DAX 30 (FDAX) recovered in the area of 10290.5 level by adding at the end of five days of 2.92%.
Reduced interest in safe assets, coupled with the relatively strong data from the US weighed on precious metals. Against this backdrop, gold (XAU / USD) has fallen in price by 2.32%, silver (XAG / USD) has lost 4.77%. Brent crude oil (BRN) ended the week rising at a rate of 10.11%. Quotations first upgrade at least 6.5 years, down to the level of 42.20, but then played all lost. Additional support for the black gold was at Baker Hughes background data on the number of operating drilling rigs, which this week has fallen by 8 units.
The economic data of the last week:
- “Black Monday” on the stock markets of the world: all the global indices in the red
- Tuesday . The Bank of China lowered the benchmark lending rate to 4.6% from 4.85% and the deposit rate to 1.75% from 2.0%
- Wednesday. US: changes in the volume of commercial oil reserves in the vaults of -5.453 million barrels against the forecast of 2.167 million
- Thursday. US: Q2 GDP 3.7% higher than the forecast of + 3.2%
- Friday. US August consumer confidence index 91.9 lower than the forecast 93.0
Forecast for the week August 31 – September 4
What happened last week has shown that the market is easily inclined to succumb to panic. However, if China’s stock market will continue to demonstrate at least a slow recovery, US indices may be influenced by the American statistics and changes in expectations of Fed rates. A key concern will undoubtedly cause the data on non-farm employment USA. In general, the situation in this sector appears to be quite stable, as well as the state of the US economy (recall that by the end of the 2nd quarter, according to revised data, GDP grew by 3.7% against provisional estimate of 2.3%). This means that the attitude of the Fed to raise rates still looks reasonable.
Therefore, if the number of new jobs exceeded forecasts (214,000), such expectations may again increase. However, against a background of a rapid recovery of the stock market, it’s probably not have a significant negative impact on the US benchmark. So do not exclude the possibility of return of Dow Jones (YM) to the district level 17083, Nasdaq (NQ) can target the rise to the level of 4416.50. Officials of the US Federal Reserve seems to have gone back on their word. Lockhart said that the performance of the economy “is really quite strong“, but the regulator will have to take into account the disturbing signals from overseas economies and the turmoil on financial markets. Stanley Fischer said on Friday that it was too early to talk about what the Fed will do in September. It is possible that some clarity will be the evening of August 29 in the framework of discussions with the deputy head of the Fed’s vice-president of the European Central Bank and the head of the Bank of England at a symposium in Jackson Hole.
At the current stage of the restoration of the Asian indices looks only a consequence of the policy pursued by the Bank of China aimed at maintaining sufficient liquidity. Therefore, as soon as the controller will stop the intervention, which, I must say, it is very expensive, the fall can be resumed, although not as fast as before. The fact is that due to the ongoing weakening of the economy of China, the value of shares of local companies still looks unjustifiably high. Of macroeconomic statistics should pay attention to the data on the index of business activity in the industrial sector in China. If the index will continue to deepen the recession in the region, this can put additional pressure, including on the Hang Seng (HSI). Benchmark may be reduced in the area of level 20700 with the further aim at around 20060.
Commodity and raw market
Brent “found” short-term bottom. Growth of 9%, which is the black gold showed on Thursday, largely was caused by technical factors, though, of course, was the root cause of the positive dynamics of growth of the US economy in the 2nd quarter and the stabilization of the situation in the stock market. Now that the main shock behind oil can exhibit a much more restrained reaction. Although the fact that the quotes were fixed asset above 48.10 dollars per barrel, gives reason to believe that in the near future they will at least stabilize in the range of 45.00 – 55.00. The ability to lift the area of the upper limit of this range is not ruled out. This will be possible under the condition that the United States will continue to decline in production and the number of operating drilling rigs according to oilfield services company Baker Hughes. It is highly desirable and would be a further decline in US commercial inventories. However, given the end of the holiday season, the likelihood of such dynamics is not too high.
Copper (HG) at the end of last week, has developed an upward correction. Quotes of the metal climbed to the district level 2.3420. In many ways, this was due to a reaction to the stimulus measures taken by the Bank of China. The fact that Celestial is the largest consumer of the red metal in the world (about 48% of the total consumption). Nevertheless, fears of further slowdown in the economy remain. So while talking about any change in the trends is not necessary. If the data on the index of business activity in the industrial sector in China would signal a continuation of the recession, copper may decline to renew the district level of 2.1900.
Warning: Profitability in the past does not mean profitability in the future. Any projections are for information only and does not guarantee a result.